NETHERLANDS - The pension fund of Dutch food retailer Ahold has introduced a new investment policy and decided to outsource its operational risk and asset management.
Following an extensive asset-liability management study, it has started increasing its fixed income allocation to 50% at the expense of its securities portfolio, which is to be reduced to 35%, according to its annual report for 2010.
In addition, the Ahold pension fund has raised the hedge of the interest risk on its liabilities from 50% to 75% through interest swaps.
Following falling interest rates, the hedge contributed 2.1% percentage points to the scheme's overall result of 10.3%.
In contrast, the scheme's 75% cover of its currency risk caused a loss of 3.1 percentage points due to a weakening euro.
Its board said it completed outsourcing its operational risk and asset management last year to a group of selected asset managers that will be directed by newly appointed fiduciary manager AXA Investment Managers.
The fiduciary manager will also be tasked with operations on derivatives overlay structures and advice on strategic and tactical policy.
The pension fund is also extending its internal capacity and expertise on risk and asset management and re-focusing on strategic and tactical management tasks.
All equity investment regions showed an outperformance, with emerging markets returning 35.6%, and the US and Asia Pacific including Japan delivering 23.9% and 24.1%, respectively, leading to overall equity returns of 18.5%.
The Stichting Pensioenfonds Ahold attributed the 5.3% return of its fixed income portfolio to its internally managed government bonds portfolio, which returned 4.9% against the benchmark's return of 1.7%.
Pension fund officials said the fact the scheme had a large overweighting in Germany and the Netherlands - and hardly any exposure to the PIGS countries - had played an "important role" in the performance. They added that externally managed credits generated 4%.
Listed and non-listed European property returned 16.7% and 6.5%, respectively.
The pension fund's 3% alternatives portfolio - comprising private equity, mezzanine funds and infrastructure - generated 27.5% through successful exits from Dutch buyout funds, as well as returns on listed private equity.
The board said it had agreed with the employer to keep contributions at 14.7% of the salary this year, provided that a consistent financial set-up was reached next year.
The Ahold pension fund, which has a coverage ratio of 112.2%, said it granted its 80,000 participants an indexation of 50% of its standard compensation for inflation.